Yes, the window is broken. No, nothing good will come of it

Have you ever heard somebody comment about disasters (such as tsnuamis, hurricanes) as though they would provide some kind of economic stimulus? Have you ever heard them suggest that there is some kind of economic benefit to society because of this disaster? In case you haven’t, here is an example of Paul Krugman committing the fallacy after 9/11 in 2001:

Ghastly as it may seem to say this, the terror attack — like the original day of infamy, which brought an end to the Great Depression — could even do some economic good.

As I’ve already indicated, the destruction isn’t big compared with the economy, but rebuilding will generate at least some increase in business spending.

This is idiotic reasoning, and is absolutely 100% wrong. Please dont’ misunderstand me, I’m not trying to say this to be “mean”, because this has nothing to do with being optimistic or pessimistic after disasters . It is merely a statement of economic reality.  

The reason this reasoning is fallacious, has to do with what is seen and what is not seen. Frederic Bastiat uses the example of a shopowner’s window that is broken by his son. It wouldn’t make sense to suggest that somehow this is good for the economy because now the shopkeeper has to go and spend money to get a new window. Why? Because this is only looking at “that which is seen”, if the shopkeeper didn’t spend money on a new window, he could have otherwise spent it on new shoes or something else that he preferred. This is “that which is unseen”. So if the window wasn’t broken by his son, the shopkeeper would have his window and new shoes, while in the other scenario, the shopkeeper only has his window repaired and nothing else. So it is clear to see that the shopkeeper is better off in the scenario where the window was never broken in the first place.

Even from a common sense standpoint, it would be plain to see that when things are destroyed, it is hard to argue that society will somehow get back that thing that was destroyed plus more, purely because it created a stimulus. If I wanted to take this reasoning to it’s logical end, why don’t we just go around purposely destroying things to create a ’stimulus’ out of them? The very idea is absurd.

Next time you see somebody say that disasters (or any other destruction of real property) are good for the economy, do them a favour and show them why that doesn’t make sense.

January Market Anarchist Carnival

Welcome to the January 29, 2009 edition of the Market Anarchist Carnival. For newcomers, it is a collection of anti-state and pro-market blog articles that have been submitted during the month. 

Tali presents The Pinup Shop Update: War is Never Pretty posted at The Pinup Blog. This entry is about how the author once used to support the troops, but now realises that war is never pretty. 

David Lamb presents In Defense of Capitalism: The macroeconomic cost of a Detroit Bailout posted at Killer Buffalo. David looks at the cost of the bailout, as well as potential issues that could arise in the future

Obadiah Shoher presents The barbarously socialist American economy posted at Samson Blinded.

Andrew Quemere presents Decapitate The State posted at Andrew’s Blog, discussing whether the US Federal government even needs a president.

Tamir Birk presents Save the Economy: Legalize Marijuana posted at Informed Vote | Keeping Canadian Voters Informed. 

Francois Tremblay presents We are all war criminals. posted at Check Your Premises. Francois looks at various issues regarding tax, war, tax evasion and where responsibility lies.

Francois Tremblay presents The minarchist fallacy: it?s for leftists too! posted at Check Your Premises. 

Andrew Quemere presents Who Is The Ruling Class? posted at Andrew’s Blog.

David Z presents A reply to Mike Huben’s Non-Libertarian FAQ, at No Third Solution. I found this to be an excellent blog post and it’s well worth reading .

Michael Wiebe presents The Case for Free Trade at Libertarian Anarchy

That’s it for this edition! Submit your blog article to the next edition of market anarchist carnival using the carnival submission form. Next month’s host will be Libertarian Anarchy

Against Intellectual Monopoly

I recently found out about this book, “Against Intellectual Monopoly” by Michele Boldrin and David Levine, which is a critical look at intellectual property (IP). I think it is a must read for anybody interested in intellectual property, as they examine many of the arguments surrounding the issue. 

I’m just slowly making my way through the book myself, but in general there are real world examples of how development of new ideas may have actually occurred faster if there were no such thing as government granted monopoly over intellectual ideas. The existence of government ‘protections’ over these IP rights such as patents and copyrights actually makes entrepreneurs spend more time and effort trying to secure legal rights to monopolise inventions, as opposed to spending that time developing and improving the product. One example provided in the book is the case of Henry Watt who invented the first type of steam engine and acquired related patents for it in 1769 and 1775, these patents later allowed him to block further development of the idea in the courts – since the newer, more efficient engines designed by his competitors were using one of the ideas that Watt had patented (a separate condenser). So because his competition were barred from building on the original idea (thanks to patent law), the invention of the “compound engine” was delayed, which could quite potentially mean that economic growth and development were delayed by years. 

Also of interest regarding IP is Stephan Kinsella’s 2001 work, Against Intellectual Property which is interesting because it presents the theoretical argument that there should be no such thing as IP.

A satirical example (not from the book) that shows how absurd IP is, can be found here. 

Two Australian artists have written and copyrighted a composition that includes the notes corresponding to the touch-tone phone sounds for every conceivable 7- and 8-digit phone number. Therefore, they say that every time a phone number is dialed, they’re owed a royalty.

Doesn’t it seem ridiculous that someone could copyright the tones made by your phone when you dial a phone number? I think this really shows you that IP law is completely arbitrary both in what it applies to, and in determining the length of time that someone gets a monopoly over it. Whether the intellectual monopoly expires 1 year after creation, 70 years after the author of the work dies, or 5 seconds after the author’s niece’s best friend’s dog dies, it’s all completely arbitrary!

You can get “Against Intellectual Monopoly” from Amazon, Cambridge University Press and it’s even been made available for free via PDF here. I think that while the argument against IP may seem controversial at first, it deserves serious consideration.

Sell the Sizzle

Found this a day or two ago and I thought I’d just share it around. It’s called “The Sizzle of Economic Freedom“, by the Pacific Research Institute and it looks at the academic work done that supports the case for liberty. Greater economic freedom has many benefits:

• higher personal income
• lower unemployment
• faster economic growth
• better health

Call for January Market Anarchist carnival submissions

First off, Happy New Year to everybody. 

The Market Anarchist Carnival is a collection of articles submitted that month that are pro-market or anti-state in nature. It’s a way of generating traffic and awareness about the ideas of individual liberty and voluntary exchange. In December it was hosted at Hellbound Alleee and my submission was “The War of All against All“. 

So this January, I’m hosting the MA Carnival right here on the 29th, so this is a call for submissions. Your own submissions can be made here. Please remember that the subject of your submission must be pro-market or anti-state.